By averting an election, politicians from all three parties have delivered a big win for Ontario. They can now take a bow and savour their victories:

First, a win for Premier Dalton McGuinty, whose Liberal minority government has done the right thing with an inspired budget deal that retains its grip on power — taxing the rich to reduce the deficit, while funding child care and welfare.

Second, a win for NDP Leader Andrea Horwath, who demanded the right things by breaking Ontario’s anti-tax taboo and helping the disabled — while keeping the balance of power.

And third, a win for the influential Progressive Conservative politician who helped lay the groundwork for the win-win deal announced Monday: No, not current Tory Leader Tim Hudak, but former premier Bill Davis, who led the PCs from 1971-85 and is ever-mindful of his legacy.

It was Davis who visited his old Queen’s Park office after last fall’s election, accepting an invitation to help the current occupant make minority government work. It made for a fine photo, and prompted McGuinty to heed Davis’s advice — reaching out to the opposition in search of consultation, co-operation and creativity.

But the two opposition parties responded with dramatically different approaches, setting the stage for Monday’s denouément. The Tories washed their hands of the budget by vowing to vote it down, leaving a political vacuum for the NDP to move into. And once Hudak walked away from the table, Horwath ate his lunch.

Despite leading a third-place party, Horwath has since overshadowed Hudak, winning the government’s attention and the media spotlight. She pushed traditional NDP demands but also showed savvy by changing up the mix.

The NDP had the good sense to drop its HST demands when the Liberals complained of the $350 million cost. She kept pushing for more child care and disability payments.

And Horwath asked for something that she’d never campaigned for: a new tax on income over $500,000. It was an eminently reasonable request, but one that caused some anguish for McGuinty, who had given explicit promises on the campaign trail not to hike taxes.

The Liberal premier has been criticized by many — including me — for his reluctance. But it’s worth noting that Horwath was no less tax-shy in the last campaign. Now, they both deserve credit for sensing how the political climate has shifted: people support higher taxes (on higher earners) if put to good use.

The more they talked, the more common ground they found. In a brief phone conversation last Friday, and again in a secret one-hour meeting in the premier’s office Sunday, the two leaders thrashed out their differences without the pressure of a media throng camped outside. McGuinty heard her out in a “respectful conversation,” as Horwath described it, on the tax issue.

But he never moved on it. That changed Monday at their final 30-minute meeting, where the premier made Horwath two final offers she couldn’t refuse.

First, she could have her tax-the-rich plan, but not for redistribution to the poor. Instead, the Liberals would apply the entire $470 million in new tax revenues toward balancing the budget (and then cancel the tax once the deficit is wiped out in 2017-18).

Second, there would be more money for the poor — more, in fact, than Horwath was asking for. But McGuinty would find the money from other budget allocations and savings.

Interestingly, Horwath had conspicuously ignored the cause of general welfare recipients in her public demands, focusing only on disability payments. Doubtless that’s because voters are better disposed toward disability than poverty. Good on McGuinty for one-upping Horwath by finding extra funding to boost both.

For the Liberals, the final deal makes for good government and smart messaging, inoculating McGuinty from predictable Tory tax attacks: the premier stressed he was taxing the rich only because he was forced into it by a minority Legislature, and pointedly called it an “NDP surtax” designated for deficit reduction. Instead of a tax-and-spend Liberal, he can recast himself as a tax-and-reduce-the-deficit Liberal.

And the agreement allows McGuinty to tell people on welfare, anti-poverty advocates, and many in his own party that he came through for them — even when the NDP left welfare off the list.

Horwath knew enough to quit while she was ahead. Her election threat offered limited leverage so soon after the last one. But she talked it up with grace, and backed down with dignity.

These two partisan rivals have now become BFFs: Budgetary Friends For the Short-term.

McGuinty and Horwath deserve to bask in their budgetary victories because they wisely heeded Bill Davis’s advice. Hudak, however, never got the memo.

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